With growth rates slowing for U.S. medical device sales, many American companies are exploring investment opportunities outside the country. Abroad, we find approximately 95% of the world’s population, 75% of the GDP, 65% of medtech spend, and 60% of healthcare spend. So with numerous U.S.-based medtech firms achieving more than half their sales domestically, it’s easy to understand why many are exploring and investing in global opportunities. However, their non-U.S. sales performance hasn’t always met expectations. Many find that products don’t perform as well as planned, penetration takes much longer than expected and commercial productivity is underwhelming.
But some companies are finding success, by trying different strategies and learning from their initial mistakes. Over time, they’ve developed commercial strategies that are better suited beyond U.S. borders and that succeed in supporting growth. The most important secret to their success doesn’t lie in knowing exactly what to do in each country, as that often varies by region, but in avoiding their most significant mistakes. As a shortcut to your own global sales success, I’ve compiled the five most common reasons that global commercial initiatives fail.
- Not customizing appropriately. At the highest level, the biggest mistake that companies make is assuming that the commercial strategy that worked well in the United States will work across the globe. Using a global message, value proposition, segmentation and targeting scheme, product configuration and pricing is unlikely an optimal strategy. Some customization is almost always needed. To succeed, you need to balance the inefficiency cost of customization with the increased adoption it can generate, and find the point where you optimize profitability.
- Failing to leverage local market knowledge. Most companies will do a simple assessment of market size and ask for feedback from local management regarding their interest in a product, but fail to dive into many more details, which can be critical for success. For example, clinical surgical practices can differ dramatically between the United States, Europe, Asia and elsewhere in terms of adoption of new procedures, use of minimally invasive techniques, acceptance of implantable devices and many other factors. At a minimum, you need to look at per capita metrics and growth rates, and the closer you can get to relevant procedure measures (or good proxies), the better. To further improve your chances of success, you need to understand the current standards of care, how the product will be reimbursed, who are the key decision makers and influencers, what regulatory issues might arise, and which hospitals might be early adopters and reference centers.
- Underinvesting in global marketing. Expecting your U.S. product manager to design and implement a global strategy is doomed from the start. At a minimum, centralized global marketing resources are needed, but chances of success improve exponentially as you build regional and local marketing expertise. Localizing your marketing strategy, which may require some local clinical studies, clinical training, or providing customized marketing and sales tools, is worth considering as well.
- Launching the wrong products. Many companies pressure their local affiliates to launch every new product developed. Similarly, some countries are excited to get the latest technology without really understanding how appropriate it might be. Many times, simpler products at a lower price will be more successful and can later be used as a door opener for launching more innovative technologies as the market evolves and opportunities grow.
- Picking the wrong countries. Most likely there are limits to the investments you can make each year, and some hard decisions need to be made to prioritize countries. There also will be some countries that won’t be worth your investment. But simply selecting the largest or fastest-growing may be ill advised. Some will be more appropriate than others for different types of products. Try to determine in advance how quickly and broadly your new product might be adopted. How well could you leverage existing customers and relationships to support a launch? Will you have to create the market or can you take market share from other similar, but inferior or more expensive, products?
Once you’ve corrected for these mistakes, you also need to make sure you establish performance metrics and follow through with measurement over time. If you don’t define success, you’ll never know if you achieved it. Early on, you’ll want to have leading indicators, like the number of trained physicians, number of new and repeat customers, and number of speaker events. Later, you will also need to track more common metrics like sales, share and growth. On a global scale, you should also begin to look at relative performance across the globe, so you can reallocate investments as you learn more about each market.
Although some of these ideas may seem basic, surprisingly once commercial strategies go beyond U.S. borders, common sense can get lost in translation. Several of these ideas also require investment of resources and money, which can be more difficult to secure in some corporations. Implementing a few global product expansions while avoiding the mistakes mentioned, and creating more and more short-term success stories may be the key to getting more consistent funding and turning around your business performance outside the United States.
Bret Caldwell is a principal in ZS’s Medical Products and Services practice. He has experience in an extensive range of sales and marketing issues, such as sales force design, product launch support and global market development.